Inflation spike in Europe is tied to the Olympics, Taylor Swift: UBS

The Olympic Games are causing a surge in prices, but French consumers aren’t likely to feel its pinch.

Mega events like the Olympics, or even big concerts like Taylor Swift’s Eras tour, lead to a rise in demand for hotel — rooms and airline tickets, as well as other goods and services needed by the influx of visitors. Even so, most consumers may not feel the impact, according to UBS. 

Still, the data might suggest otherwise. That’s because the method for calculating consumer price changes might pick up the spiking costs in industries associated with tourism — like hotels — and provide a distorted impression.

“The Olympic Games or a Taylor Swift concert create a sudden demand shock,” wrote Paul Donovan, chief economist at UBS Global Wealth Management, in a recent analyst note. “The measurement method for these prices is more likely to capture the unusual and transitory pattern of demand, and it is here that the increase in consumer price inflation takes place.”

This was already seen with the Eras Tour, as it boosted hotel revenue in cities across the U.S. where Swift was performing.

This year, U.K. hotel prices increased in June, but Donovan said the higher costs “may have been borne by a select group of aficionados of Swift’s music” given that the Eras Tour came to Wembley Stadium that month.

Meanwhile, the Summer Games are causing a similar phenomenon in Paris. “The tourists flocking to Paris for the Olympics, and paying the price, are not representative of French consumers,” he wrote.

Though hotels in the City of Light struggled in the beginning of July, with an estimated 60% drop in occupancy rates that prompted hotels to discount rates, the trend during the Games has reversed. Paris hotel occupancy levels during the Olympics, which started on July 26 and run until Sunday, are up versus last year, according to global real estate data company CoStar. But in the days after the closing ceremony, Paris hotel bookings are projected to drop from a year ago.

The city’s hotel industry has also seen massive year-over-year price increases. For each day during the first full week of this year’s Games from July 28 until Aug. 3, CoStar found a 206% year-over-year growth in weekly revenue per available room. That was fueled by a 17.4 percentage point rise in occupancy to 85.4% as well as a gain in the average daily rate (ADR) of 143%.

The Paris tourist office expects an occupancy rate of 86% from Aug. 5 through Sunday.

A notable price surge has also been seen in other parts of France. In the surrounding Île-de-France region, CoStar found that ADR grew 83.4% in…